Mercer, the consultancy, outsourcing and investment services firm, is to launch a groundbreaking new investment survey this month to benchmark private banks’ investment processes.

A key difference with this survey, Mercer says, is that while other studies focus on business and investment trends within the private banking sector, this new one will compare banks’ investment processes to those of institutional investors. This ties into the widely-held belief that high net worth individuals are increasingly desiring institutional-quality advice – a trend highlighted by a number of high-profile studies such as the Merrill Lynch/Capgemini World Wealth Report.

“We want to pick it up where others have left off. We believe this is the first survey that digs deeper into the investment processes, and therefore will be able to answer whether high net worth investors are benefitting from institutional-quality services from private banks,” said Hansi Mehrotra, Mercer’s head of wealth management services in Asia.

Mercer believes that it is well placed to conduct such a study because it advises several large retirement and sovereign wealth funds and has a significant institutional investor client base.

The survey, which will be conducted through interviews with private banks’ investment officers, heads of investment strategy and heads of product, will cover governance, resourcing, asset allocation process, product research and risk management. It will compare processes in addition to outcomes and aims to “highlight some of the major differences between institutional and retail investment thinking.”

“We’ve seen examples of private banking groups establishing strategic asset allocations based on very simplistic mean-variance optimisation processes, yet also feature significant allocations to alternative assets where such optimisation may not capture the expected return characteristics all that well,” said Mehrotra.

“In contrast, large institutional investors are increasingly basing asset allocation decisions on sophisticated stochastic modelling attempting to reflect the potential heightened tail-risks associated with alternative investments in their analysis.”

The survey’s findings will surely be eagerly awaited by the industry as it moves to re-establish client trust after the events of the financial crisis. In the wake of frauds such as Bernard Madoff’s notorious multi-billion dollar Ponzi scheme, heightened due diligence is at the forefront of many investors' minds, for example.